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Book recommendations - Red Ink: Inside the High-Stakes Politics of the Federal Budget

I just started reading this book this morning....it's written by David Wessel. He's the economics editor for the Wall Street Journal.

Quote:

As the federal debt balloons, reducing it would seem more and more pressing. Yet policymakers remain far apart. Debt, deficit and budget rhetoric is often accompanied by numbers cherry-picked to support a particular political view.

But a new book by Wall Street Journal economics writer David Wessel lays out the numbers that both political parties face.

"In the early 1980s, about 10 percent of the federal budget went to Medicare and Medicaid," Wessel tells NPR's Renee Montagne. "Now, it's about a quarter of all spending, and it's on the way to 33 percent of all spending unless something happens to change the trend."

The book is called Red Ink: Inside the High-Stakes Politics of the Federal Budget, and it breaks down the budget in stark terms: how the government spends its money, who pays what in taxes, and why politicians can't reduce a potentially catastrophic debt load.

Wessel tells a story about one politician who didn't pay his taxes: Richard Nixon. Nixon wasn't required to disclose his tax returns as a candidate, but he was embarrassed when they were leaked to the Wall Street Journal - revealing that he had paid barely any taxes between 1970 and 1972. "That turned out to be a huge scandal at the time," Wessel says, "and in fact, it was that report that led Richard Nixon to utter his famous words, 'I am not a crook.' "

Nixon ended up having to pay a lot of back taxes, "but that's kind of lost to history, because the Watergate scandal obscured it," he adds.

Tax returns are also an issue for current presidential candidate Mitt Romney, who has been reluctant to release his records. "I think that in the Romney-Obama contest, the question is not only how much did Mitt Romney pay in taxes, but what should the government policy be toward taxing people at the top," Wessel says. He identifies three questions on which the candidates disagree: First, does the U.S. need more tax revenue in order to bring down the deficit? Second, if it gets more tax money, from whom should it come? And third, how much should we rely on the tax code to close the gap between winners and losers in our economy?

"People who made over a million dollars last year got about 12 percent of all the income in the United States, and paid about 18 percent of all the federal taxes," Wessel says. "If you take the famous top 1 percent ... they got 17 percent of the income and they paid 25 percent of the taxes." Politicians and voters disagree on whether that's fair, Wessel adds, but that's a question of political judgment, not numbers.

But what about those who pay no taxes at all? Wessel says 46 percent of households paid no federal income tax at all last year - many of them lower income households that are exempt, people who take advantage of tax breaks offered by the government, and retirees. "A lot of them don't have much money, that's true," Wessel says, "but I think it's also contributed to a kind of sense that they're only taking from the society and not giving to it. ... [It] creates a political problem, it makes them feel like they're outside the system, and it leads to a lot of resentment."

Wessel says he hasn't heard any substantive talk about the budget from either party on the campaign trail. "It's hard to get a consensus, a political consensus for doing what we have to do if people aren't getting straight talk," he says. "It is simply not true that we can solve our deficit problem only by taxing the top tier of people, and it's very unlikely that we can cut spending enough to solve the deficit without raising taxes on pretty much the bulk of the American people."

If he were moderating the campaign debates, Wessel says, he'd ask each candidate for five proposals to combat the deficit. "How much would they do in tax increases? How much would they do in cutting defense spending and so forth," he says. "A budget is a way to put into specifics what your belief system is. So it would be good if we could somehow force the candidates to say, yes, I differ from my opponent, here's my recipe, and then people would know what they would do if they were elected."

I'm only 50 pages through but it has been a quick, interesting read. It has been largely non-partisan (both sides have contributed to the royal abortion that is the federal budget, deficit and debt) and it discusses the economic history of our federal budget, as well.

If you're at all interested in this kind of stuff, it's worth the pick up! It would also be nice to be able to discuss it with other people who've read the book.....

Does he cite sources well? I have my own repository of links that I'd like to build and if he uses something that I don't, it might be worth picking up. If he's just going by stuff on the OMB and GPO, then I'm not really interested.

Does he cite sources well? I have my own repository of links that I'd like to build and if he uses something that I don't, it might be worth picking up. If he's just going by stuff on the OMB and GPO, then I'm not really interested.

There are 162 sources in the "Notes" section in the back of the book, along with a lengthy bibliography. These are all in addition to the OMB, CBO, Tax Policy Center, Committee for a Responsible Federal Budget, the Bipartisan Policy Center, the Center on Budget and Policy Priorities, and the Peter G Peterson Foundation.

I started absorbing the budget recently. Has anyone given this thought? It actuals seems straight foward that we are complete idiots, but there has to be more methodology to Congress' madness.

If you look at the budget, our Mandatory spending (SS, medicare, medicaid, interest on the debt etc....) is 2.4 Trillion. Our tax receipts are 2.6 Trillion. We barely cover our entitlements and interest on debt with taxes, and have nothing left over to pay for the actual "government". Does anyone else see this as a complete out-of-control way to budget our government?

Am I looking at this too simplistically? That is why I say that neither the president (ANY president, current or past) and Congress aren't really serious about balancing the budget. No one wants to go through the pain of doing it (and it will be painful, from rich people down to poor people, there is no way to cure this without having everyone pay more and everyone take less).

This is why I laugh at "relative politics" where, Obama for instance, talks about "reducing th deficit over 10 years" (Bush said the same, and they are long gone in 10 years). Am I supposed to be impressed that the amount of negative spending gets better? We are still deficit spending. That should be phrased "less sh!tty, but still sh!tty".

See photo circled in red. And sorry it is huge. I couldn't resize at home with my MS paint-like editing software.

I started absorbing the budget recently. Has anyone given this thought? It actuals seems straight foward that we are complete idiots, but there has to be more methodology to Congress' madness.

If you look at the budget, our Mandatory spending (SS, medicare, medicaid, interest on the debt etc....) is 2.4 Trillion. Our tax receipts are 2.6 Trillion. We barely cover our entitlements and interest on debt with taxes, and have nothing left over to pay for the actual "government". Does anyone else see this as a complete out-of-control way to budget our government?

Am I looking at this too simplistically? That is why I say that neither the president (ANY president, current or past) and Congress aren't really serious about balancing the budget. No one wants to go through the pain of doing it (and it will be painful, from rich people down to poor people, there is no way to cure this without having everyone pay more and everyone take less).

Is that the first time you've taken a look at Federal outlays and revenue? There's a reason why a bunch of people keep saying that Medicare, Medicaid, and Social Security represent the most predictable economic crisis in history.

Everybody in Washington knows it needs reform. But nobody wants to sacrifice their current election cycle to make meaningful reforms that only pay dividends decades into the future. Our government will only make the hard choices when it's forced to. So I wouldn't be surprised if we're in for a Greek like debacle (with US sized consequences) 15 years down the road.

Quote:

This is why I laugh at "relative politics" where, Obama for instance, talks about "reducing th deficit over 10 years" (Bush said the same, and they are long gone in 10 years). Am I supposed to be impressed that the amount of negative spending gets better? We are still deficit spending. That should be phrased "less sh!tty, but still sh!tty".

See photo circled in red. And sorry it is huge. I couldn't resize at home with my MS paint-like editing software.

When the politicians submit CBO graded budgets, the CBO grades them in 10 year windows. And most of the time, the lawmakers will backload a lot of the spending cuts and tax hikes so that it improves the 10 year picture, but it doesn't do anything for the first 7-8 years.

When the Democrats submitted the PPACA to CBO budgeting review, they collected the new taxes for 7 years while only paying out benefits for 4 years in the first 10 years of the law which is how they got the "it cuts the deficit!" talking point. Every year after that is an actuarial disaster, although you'll never see that in the headlines of the newspapers.

Both sides do it. There are a few elements within the Republican party who are committed to really bringing down the deficit and the debt, but they simply can't get enough political traction to do it. The budget cuts both parties agreed to last year? It doesn't actually cut the budget. It simply slows the rate of growth in the budget. I don't think there's been a year post WWII where Federal spending has actually declined in dollar terms.